SGC vs. CTAS: Which Stock Is the Better Value Option?

Investors looking for stocks in the Textile - Apparel sector might want to consider either Superior Group (SGC) or Cintas (CTAS). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Superior Group is sporting a Zacks Rank of #2 (Buy), while Cintas has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SGC is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

SGC currently has a forward P/E ratio of 23.66, while CTAS has a forward P/E of 32.55. We also note that SGC has a PEG ratio of 2.37. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. CTAS currently has a PEG ratio of 2.80.

Another notable valuation metric for SGC is its P/B ratio of 1.13. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, CTAS has a P/B of 14.72.

These are just a few of the metrics contributing to SGC's Value grade of B and CTAS's Value grade of F.

SGC stands above CTAS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SGC is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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